Three ways food manufacturers can increase their profits today – News Couple
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Three ways food manufacturers can increase their profits today


Formula manufacturers can increase their profits today

Three ways you can increase profits

One of the most overlooked sources of profit in a formula manufacturing enterprise is the existing business operations. Too much attention is spent on winning new sales or adding new products and too little energy focused on existing business.

While adding new sales is an important component of any company’s life and success, instant profits can be found in your existing product mix and with your existing customers.


We’ll explore 3 things you can do today to ensure your organization gets the most out of its existing business processes without changing much of what you do today.

• Reduce inventory shrinkage
• Reduce formula loss
• Follow up on opportunities models

1. Reduce inventory shrinkage

Is this a problem for you?

Go to your system (manual or computerized) and find the available quantity of 10 raw materials. Then go count the inventory on hand. Of these, how often was your system equal to an actual count? Is 8 correct? How about 7? Definitely better than 6. If 9 items do not agree by more than 5% – you have a problem.

How often do you take a physical inventory? Is it more than once a year? Do you have to count all of your inventory or just certain items? If you are counting all inventory more than once a year for reasons other than a financial audit – you have a problem. If you count all inventory more than once a year for reasons other than financial audit – you have a problem.

Why should I care?

For most fixture manufacturers, the highest process cost is the raw materials consumed to produce finished goods. We usually keep our stock levels low to reduce usage
Operating capital. This way we have more flexibility to manufacture multiple products. So – because we maintain low levels of raw materials and inventory is critical to our business – out of stock can cost us significant profits in lost sales or customer goodwill.

You will be surprised to know that many fixture manufacturers attempt to run their business at 75% or less stock accuracy. This means that 75% of the elements in their systems do not accurately reflect what is on Earth.

How do you schedule production with such inaccurate information? How do you know which products make you money? Don’t you have better things to do than a stock account that you know will be out of sync in no time?

How to fix this problem?

Select the most contrasting elements

Review the results of the last physical inventory. Rank the items with the highest level of variance (adjusted quantity * cost).

Focus your attention on those elements that She has the highest teams

You will get the most out of your profit if you fix these items first. Addressing the problem in bulk but a low-cost item or a low-volume, high-cost item will have little impact on profits today. Add a policy to mark all current inventory and receipts from these items with a red dot, so it’s all
In your company you know that this element has had problems in the past.

Define ways to better keep track of items in the list

Review the ways in which you currently record the receipt and use of these items. You should look for ways to increase the likelihood that you will get a good number of these items.

Focus on the following activities:
• Materials received from suppliers – work with suppliers to receive inventory in usable quantities
• Use of materials in batch tickets – add operations to double the calculation of these items when they are added to production
• Return excess materials to stock after production – avoid movement of these items if possible. If stock must be returned to stock, add procedures to ensure that the opened container is the first container to be used in the next production.
• Record obsolete/expired stock disposal – Add procedures to ensure items are disposed of in your system.

Cycle count these items on a monthly basis Record the difference every month. When you get 3 months of minimum variance, remove that item from the list and move on to the next higher item on your list.

In the long run, you’ll likely want to automate a lot of this task with a computer system written specifically for the formula manufacturing industry. Vicinity software (along with other applications) uses multiple units of measurement to help your organization with this task. In addition, some applications provide tools to process the logging of broken container quantities (smaller than a cylinder) to increase the level of accuracy in logging raw material usage.

In general, your organization will need to have inventory accuracy in the 90% range before it can fully address this issue. While the formula industry is known for its stock changes, there is no reason why an organization should not achieve very high levels of accuracy.


75% is the overall level of accurate inventory levels that are reflected in the business systems of many formula-based manufacturers.


2. Reduce formula loss

Is this a problem for you?
Most formulation manufacturers create formulas in research and development and then work with production to scale the formula to production volumes. Once the formula has been in production for a few months, a theoretical production yield is generated. After that time, little attention is paid to the actual yield of the formula.

What processes do you have in place to review the actual return of a formula? Are you looking at formulas with higher or lower yields? Are you comparing actual returns versus theoretical returns? If you calculate the production yield at the end of the month and do not look at the yield according to the formula – you have a problem.

Why should I care?
Manufacturers of fixtures live and die because of yields. If yields differ significantly from the norm, there are a number of regions affected. If the formula requires more materials than expected to obtain the same finished goods, you may experience shortages of raw materials, delays in shipments of finished goods, and overload
In expedited orders through production or increases in quality control additives to bring the product within specifications. Both of these effects erode profits. Additionally, if the actual return of the formula is not in line with the theoretical returns, you are probably not experiencing the margins you were expecting.

If you experience above-average losses in one of the equations, you are missing out on opportunities to make additional profits.

How to fix this problem?

Determine the loss by the formula for the last 3 months

Measure yield by comparing inputs against total outputs (including finished goods and intermediates) for the previous three months. Ensure that only closed batches are included and no future production is expected.

Target items that have the highest loss
List the formulas in order of highest loss value (loss% * average selling price or cost * volume of production). These elements will achieve the greatest change results. Focusing on low-loss, low-cost or low-volume items will not produce as high results as high-loss, high-cost, and high-volume items.

Determine the cause of the loss
Most of the unexpected losses occur in changing raw material specifications, changing operator procedures or changing equipment performance. Depending on the facility, the human element is the element with the highest degree of error – focus on what the material handler has to do when
make this formula. Inquire if procedures have changed or if any material packaging or handling instructions have been changed. Involve the R&D lab to calculate theoretical yields based on currently available raw materials.

Implement policies to track these variations and note exceptions
Mark the formula so that you can review the loss for each payment for 3 months. Make this part of the final quality control/packaging process. Isolate any batches with high losses and investigate the causes immediately.

Software written specifically for the equation manufacturing industry can address these issues without customization. It is common practice to review the equation return by batch and group the results by period – such as a month. Vicinity is one such app. The user can see if the batch immediately
The results are below those specified criteria. These results may also be observed for further evaluation over time.

3. Pursue Sample Opportunities

Is this a problem for you?
Most formula manufacturers provide samples for new or existing customers. Very few people have a mechanism to track these samples and follow the results. Does your organization ship samples? What is the process for making sure samples actually drive sales? If you are not able to quote the sample/sales ratio – you have a problem.

Why should I care?
While samples may seem like a minor issue in your organization, it takes a minute to keep track of the steps involved in submitting a sample. You will find that the process from taking the application form to fulfilling the application is much more complicated than simply filling out a form application. why? because everyone
Your systems are based on order volume freight – not sample volume. Samples are seen as a binary product of your normal process. Therefore, there are no systems in place for handling small quantities and the unique handling requirements for that sample.

Take an hour and follow a sample through the process at your company. See the manual steps your employees take to process this typical request. Now multiply that by the number of samples you process in a year. This is an important issue for any company that sends samples. You will likely find
That most companies will send a sample, but very few companies keep track of sample results. Very few companies record the samples shipped in a system or format that sales staff can track and management can audit.

To prove it to yourself, randomly choose 5 samples that were shipped 3 months ago. Can you track whether those samples led to a sale? Did we follow those samples? If they didn’t convert to sales, why didn’t they?

The problem here is not the cost of samples but rather the additional cost of labor to meet the sample without proper follow up. Every sample shipped is a potential sale, not just for this month but for years to come.

How to fix this problem?
Determination of sample closing rate
3-month review of samples sent 6 months ago. How many actually led to sales? Can you really tell?

Target formula / product types that led to the highest closing rates
Determine what makes these products different from others – the type of customer, the salesperson, the nature of the product.

Working with sales and research and development
Develop a plan for tracking and following up on samples sent to new or existing customers.

CRM app
If a CRM system is not available for sample tracking, then you should consider it. Adding a large client can pay off the entire effort.

Microsoft CRM compatible with Vicinity is a great way to track sample chances and increase close rates. As CRM applications become more affordable and Microsoft opens the doors to integration with vertical applications, a long-term solution is within your reach which is
Affordable to just about every company.



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